Yesterday, we saw markets rebound with news that Joe Biden is all but through the front door at the White House and then added to this, news that a Pfizer/BioNTec vaccine had produced 90% antibody immunity to covid-19 in its third stage of testing over around 45,000 people.
The French CAC closed up 17% from where it was just 10 days ago, Germany’s DAX up 13%, in the UK the FTSE 100 closed up 12%, the Dow Jones in the US up 10% and across the Far East markets were up around 7-8%. Overall, for the indices that we track, markets are up nearly 11% on average in the last 10 days.
Is the euphoria here to stay?
We suggest not, we still have a rocky road to come. Lockdown is still in place, virus infections are climbing but starting to slow in Europe, the question of global approval of this or any other of the 10 vaccine trials now at stage 3, is not there yet and then there is the question of mass vaccination whish will take months if not years. A Brexit deal is still not finalised and after all of this, the costs of the global pandemic remain to be counted and subsequently paid for.
We are ‘green’ under our Traffic Light Investment Alert service and have been since the original crash in March 2020 but we are moving to neutral and positive rather than negative now that vaccine trial results are starting to come through. There are still many hurdles to negotiate but we expect, even with the Bank of England injecting another £150bn quantitative easing (QE) last week into the economy, there will be even greater stimulus in the early part of 2020.
A bouncing ball will remain but we believe the general trend will be upwards, so we continue to invest in equities. We suggest the ‘new norm’ for markets will be much higher that it was e.g. rather that FTSE 100 normal levels being at or around 6,500 we suggest ‘water table’ will move much higher to say 7,500. We believe that the time is right for buying cheap equities provided you can tolerate the ‘bouncing ball’ for a medium and longer term gain.